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Consumer Stock Takeovers: Deals and Targets

ConAgra Foods(CAG) said Sept. 19 it was withdrawing its $94-a-share takeover bid for
Ralcorp(RAH).

"This follows Ralcorp's failure to enter into a constructive dialogue with ConAgra Foods," the company said in a statement.

Earlier in the day, Ralcorp maintained that the $5.2 billion takeover offer was insufficient. Ralcorp instead has touted its plan to spin off its Post Cereals unit as one that offered superior value to shareholders. After ConAgra was rejected by Ralcorp three times, some analysts speculated ConAgra might go ahead and turn its bid hostile.

It's no surprise ConAgra removed its offer; it said Sept. 14 it would walk away from the offer if Ralcorp didn't sit down at the negotiation table by Sept. 19. The most recent $94 bid was up from $86 a share; the original bid was for $82.

ConAgra said Ralcorp's board was "singularly focused" on its Post spinoff, refusing any attempts at M&A negotiations. ConAgra argued the "superior value and certainty" of its acquisition offer. ConAgra maintained that its offer represented a 44% premium to Ralcorp's March 21 closing price, the day before it made its initial bid; the maker of Chef Boyardee, Healthy Choice and Hebrew National food brands also said its bid was 32% higher than Ralcorp's all-time closing high.

ConAgra has said that Ralcorp's Post Cereals spinoff plan "does not provide competitive value to Ralcorp's shareholders relative to ConAgra Foods' proposal." For ConAgra, acquiring Ralcorp and its roster of private-label brands would help it bulk up its generic food brands and better compete with other private-label providers as consumers continue to trade down to lower-priced offerings. Still, if Ralcorp is unwilling to negotiate at all, ConAgra is left with few choices. Ralcorp is incorporated in Missouri, a state with strict anti-takeover laws that protect unwilling targets. Ralcorp also instituted a poison pill that protects against hostile buyers by making unwanted acquisitions very expensive to the buyer.

Additionally, Ralcorp announced in early August its plan to buy
Sara Lee's(SLE) refrigerated dough business for $545 million as part of its own efforts to bulk up its private-label operations.